Trent Cotney, Partner, Adams and Reese LLP
These days, everyone is feeling the pressure of finding the right materials and getting them on time. It is an ongoing challenge. However, once your materials are delivered, it is crucial that you know how and where to store them. Too often, contractors might be tempted to improvise, which can be the easiest approach for the short term. But in the long term, it pays to have an organized system in place.
Purchasing Process
After you win a bid and begin the project, purchasing materials is a key process. It often involves negotiating with suppliers around quantity and price. Then, you must create a schedule for all the materials to arrive. The major materials take priority since they will likely require more time for installation. You will probably acquire miscellaneous materials from a distributor and you can get those on shorter notice.
Some contractors collect lists of materials needed for the next day and place orders daily. While this tactic eliminates the need for managing inventory, it can be risky. Materials might not be delivered before workers arrive the following morning or they could be delayed even further. A safer approach is to order everything in advance and then schedule specific items to arrive the day before they are needed.
In some cases, contractors choose to order only about 80 percent of the materials they need and then order the remainder as they get closer to project completion. This strategy helps keep inventory down, but it can be dangerous if vendor supplies run low.
Once you have ordered all your materials, create a system for receiving and tracking them. It should include monitoring different
materials, quantities and arrival dates.
Usually, materials are delivered directly to the job site. However, that might not be feasible if storage is limited. If you have a
warehouse or other offsite storage option, you can have the materials sent there and brought to the site as needed. This practice might
be better for security reasons. It is easier to safeguard inventory at a warehouse than at a job site.
Even with the best planning, however, you may encounter the following issues:
■ Materials might not arrive on time due to miscommunication, human error or supply chain issues. Recently, we have had reports of manufacturers delivering shipments early and demanding payment. Make sure to read your applicator agreements in detail regarding your rights in this situation and recognize that you may be able to refuse an order that is delivered early.
■ Materials might be delivered to the wrong location, such as to the warehouse instead of the job site or vice versa.
■ An incorrect quantity might be delivered, with too much creating a storage issue or too little holding up the project.
To avoid these and other problems, consider the following guidelines:
■ Invite quotes from a variety of vendors
■ Check vendors’ reputations before doing business with them
■ Look for discounts related to quantities and payment schedules
■ Request order acknowledgment
■ Request delivery guarantee and acknowledgment
■ Check proper specifications for all materials
■ Keep communications with your suppliers open and clear
■ Continue to use and build a partnership with suppliers you trust.
After materials have been delivered, it is your responsibility to know what you have and where everything is. If too many people are in charge of this task, there is more potential to lose track. Your system should be streamlined so it is simple to check the status of materials. This process will help you prevent theft and ensure you keep enough materials on hand.
Many contractors have come to rely on electronic tracking systems and software. Using bar codes, you can scan items in as they are received and scan them again when they are removed for use. You can also determine where items are stored, if any are damaged and how much of any material is left. In addition, some systems can alert you if your inventory of a specific item gets too low and can even automatically reorder it.
Depending on your company’s size, you may find that different jobs require different inventory management strategies. However, having a basic system in place will always give you a good place to start. Research the systems available to see what seems best suited for you.
If you have questions about inventory management, do not hesitate to ask for help. Your vendors likely have a good idea of what systems work. The more efficient you are with your inventory, the more likely you can avoid unnecessary losses.
The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation. Trent Cotney is a Partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and FRSA General Counsel. For more
information on this subject, please contact the author at trent.cotney@arlaw.com.
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